### UNIT ED STATES COURT OF APPEALS FOR THE FIF TH CIRCU IT

No. 11-20261

NEW CENTURY FINANCIAL, INC., Plaintiff-Appellee,

v. OLYMPIC CREDIT FUND, INC., Defendant-Appellant.

Appeal from the United States District Court for the Southern District of Texas

Before REAVLEY, ELROD, and HAYNES, Circuit Judges. PER CURIAM: * This appeal arises from the district court’s grant of summary judgment in favor of Olympic Credit Fund, Inc. (“Olympic”), on New Century Financial, Inc.’s (“New Century”) claims of fraud and negligent misre p r e s e nt ati o n
. W E AFFIRM. I. New Century and Olympic are both sophisticated actors in the factoring industry. Factoring is a t y p e o f f i nancing where one business (the factoring client) sells i t s r ight to receive payment for goods sold or services rendered to customers (account debtors) to a n o t h e r business (the factor) at a discounted U n i te d S ta te s C o u rt o f A p p ea l s

F i ft h C i rc u i t 

### F I L E D August 27, 20 12 Lyle W . Cayce Clerk

Purs uant to Fift h Circ uit Rule 47.5 , the cour t has det erm ined that this opi nion sho uld * not be publ ish ed and is not pr ece dent excep t unde r the lim ite d cir cum st ance s se t for th in Rule 47.5 .4. Case: 11-20261 Document: 00511970656 Page: 1 Date Filed: 08/27/2012No. 11-20261

price. On November 29, 2006, Olympic and Education Advance entered into a cont r a c t u al factoring relationship. Education Advance purported to provide tutoring services to Newark Public Schools under the No Child Left Behind Act. Olympic purchased certain accounts receivable owed by Newark Public Schools to Education Advance for the purported provision of tutoring services. On April 8, 2009, Ed u c a t i o n Advance contacted New Century to discuss the prospect of a factoring relationship. From April 8, 200 9 t o May 19, 2009, New Century conducted due diligence regarding the potential transaction. On April 29, 2009, New Century entered into an Agreement for Purchase and Sale of Accounts with Education Advance to sell, transfer, and assign its accounts receivable at a discounted price below their face value. Under this agreement, Education Advance received cash from New Century in return for promises and

w arr a nti e s with r e s p e ct to the collection of the accounts receivable and payments to New Century. New Century discovered during due diligence that Education A dvance and Olympic were already in a factoring relationship. Before New Century could become the new factor, Olympic had to release its ownership and security interest in th e Education Advance account. On May 14, 2009, New Century, Olympic, and Education Advance signed a Payoff Agreement (effective date May 13, 2009). Und e r the Payment Agreement, Olympic provided New Century with a net payoff amount of $955,150.04 to release Olympic’s ownership and security interest in the account. The first and only time that New Century directly contacted and communicated with Olympic was on May 19, 2009, during a single four-minute telephone c a l l between New Century’s Vice-President of Operations, Nel Somarriba (“Somarriba”), and an account representative for Olympic, Heather P a n teleeff (“Panteleeff”). The timing of this telephone call occurred: (1) mo r e than three weeks after the Apr i l 29, 2009, effective date of the Agreement for Purchase and Sale of Accounts between New Century and Education Advance; (2) approximately one week after the May 13, 2009, effective date of the Payoff

2 Case: 11-20261 Document: 00511970656 Page: 2 Date Filed: 08/27/2012No. 11-20261

Agreement between New Century and Olympic; and (3) just hours before New Century wired $955,150.04 in funds to Olympic pursuant to the Payoff Agreement. New Century and Olympic dispute whether the purpose of the telephone call was to conduct due diligence on E d u c a t i o n Advance or to verify the amount and method that New Century was to pay Olympic under the Payoff Agreement. During the call, Somarriba stated that “she just want[ed] to make

sure and verify the payoff amount.” Soon after, Panteleeff told Somarriba that New Century was a “good” account and that Olympic “just couldn’t accommodate

one of [Education Advance’s] credits.” A few hours after the telephone call, New Century paid Olympic $955,150.04 pursuant to the Payoff Agreement. A few weeks later, on June 15, 2009, New Century discovered that E ducation Advance allegedly converted $866,869.00 in funds from Newar k Public Schools that should have been paid to New Century. That conversion prompted New Centur y to conduct an investigation, which revealed that Education Advance’s accounts receivable were f r a udulent. Specifically, New Century discovered that the purported entity Education Adva nc e h a d c o ntr acted with as “Newark Public Schools” was a fraudulent entity. New Century also discovered t h a t o n May 1, 2009, Education Advance converted a check in the amount of $254,430.00 that rightfully belonged to Olympic under the factoring agreement. Olympic had not disclosed this prior conversion to New Century. On June 30, 2009, New Century filed suit against Olympic alleging claims of fraud and negligent misrepresentation. New Century claimed that Olympic’s alleged misrepresentations and omissions induced New Century to purchase the factoring account, and that but for these alleged misrepresentation s a nd

o missions, the company “would not have entered into any agreement w i t h O lympic.” New Century sought damages in the amount of $955,105.04, th e e x a ct

3 Case: 11-20261 Document: 00511970656 Page: 3 Date Filed: 08/27/2012No. 11-20261

amount it paid Olympic for the Education Advance account. After fil i n g s uit, 1 New Century moved for partial summary judgment on its claims, and Olympic

m o v ed for dismissal of New Century’s claims. On cross-motions for s u m m a r y judgment, the district court held that: (1) the general release and merger clauses contained in the Payoff Agreement explicitly disclaimed reliance as a matter of l a w a n d precluded New Century’s fraud claims, and (2) the economic-loss rule barred New Century’s negligent misrepresentation claim. New Century timely appealed. 2 II. This court reviews a district court’s entry of summary judgment de novo , applying the same standard as the district court. United States v. Caremark, Inc. , 634 F.3d 808, 814 (5th Cir. 2001). Summary judgment is appropriate in the absence of a genuine issue of material fact. Fed. R. Civ. P. 56(a). “Even if we do not agree with the reasons give n b y t h e district court to support summary judgment, we may affirm

. . . on any grounds supported by the record.” Lifecare Hosps., Inc. v. Health Plus, Inc. , 418 F.3d 436, 439 (5th Cir 200 5). The parti e s agree that Texas substantive law applies to this diversity case. See, e.g. , Abraham v. State Farm Mut. Auto Ins. Co. , 465 F.3d 609, 611 (5th Cir.

N e w C entu ry als o so ught res cis sio n of its pur chas e agree me nt of the Educ a t i o n 1 Advanc e acc ount bas ed on mut ual mi st ak e. In grant ing sum mar y jud g m e n t in favor of Ol ymp ic, the dist ric t cour t didnot se par atel y add res s New Century’s mut ual mi st ak e clai m. New Centur y has not rais ed this clai m on app eal, and ther efo re, has w a i v e d a n y argum ent regar ding the clai m. See As kana se v. Fatjo , 130 F.3d 657, 668 (5t h Cir. 1997) (“All iss ues not brie fedar e w aived .” ).

The par tie s dis put e wh ethe r the dis tri ct cour t’s grant of sum mar y judgm ent in favor 2 of Ol ymp ic wa s pr ope r aft er t h e T e x a s Sup rem e Court iss ued its opi nion in Itali an Cow boy Partne rs, Ltd. v. Prude ntia l Ins. Co. of Am

. , 341 S. W.3 d 323 (Tex. 2011)

. It a l i a n Co wb oy add res se d wh ethe r sp ecif ic cont rac tual provis ions , wh ich are sim ilar to the pr ovis ions in the Payoff Agreem ent in this cas e , d i s clai me d reli ance or sim ply amo unte d to a genera l me rger claus e, wh ich wo uld not have dis clai me d reli ance

. We need not add res s this iss ue bas ed on the facts of this case because , as disc uss ed inf ra, New Centur y did not sat isf y the relianc e or indu cem ent elem ents of its fr aud clai m, and t h e e c onom ic- los s rule bars New Centur y’s negligentm isr epr es enta tio n c laim

. 4 Case: 11-20261 Document: 00511970656 Page: 4 Date Filed: 08/27/2012No. 11-20261

2006) ( c i t i n g Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)). Und e r T e x a s law, claims of fraud require a showing of

r e liance. See Grant Thornton LLP v. Prospect High Income Fund, 314 S. W

. 3 d 913, 923 (Tex. 2012). Claims of fraud also require a showing that the defendant intended to induce the plaintiff to act or t o r e frain from acting. See Italian Cowboy , 341 S.W.3d at 337 ( quoting Aquaplex , 297 S.W.3d at 774). Moreover, to succeed on a ne gligent misrepresentation claim, plaintiffs must show that 3 they suffered a pecuniary loss by justifiably relying on a representation. Sloane , 825 S.W.2d at 442. In this case, New Century did not satisfy the reliance element of its fraud claim. All of the alleged misrepresentations and omissions made by Panteleeff during the telephone call occurred on May 19, 2009, five days after New Century and Olympic signed the Payment Agr e e m e nt on May 14, 2009 (effective date May 13, 2009)

. T h e r e fore, New Century could not have actually relied on Panteleeff’s statements at the time that it entered into the Payment Agreement wi t h O l ympic. See Eagle Properties, Ltd. v. KPMG Peat Marwick , 912 S.W.2d 825, 827 (Tex. Ct. App. 1995) (holding that the reliance element of a fraud claim cannot b e s a t isfied based on a representation made after a transaction is complete). For the same reasons, New Ce n t u ry has not satisfied the inducement element of its fraud claim. The facts of this case do not show that Olympic “induced” New Century to enter into either the Payoff Agreement with Olympic

or the Agreement for Purc h a s e and Sale of Accounts with Education Advance. The telephone call b etween Panteleeff and Somarriba occurred after New

Und er Texas law , t h e e l em ents of negligent mi sr epr es enta tio n are: (1) the 3 rep res enta tio n is mad e by a def enda nt in the cour se o f h i s bus ines s, or in a tra nsa cti on in wh ich he has a pec uniar y inte res t; (2) the def enda nt sup pli es fal se info rm atio n for the g u i d a n c e of othe rs in thei r bus ines s; (3) the def enda nt did not exerc ise reas onable car e or com pet ence in obta ining or com mun icat ing the info rm atio n; and (4) the plai ntif f suf fer s pec uniar y loss by just ifi ably relying on the rep res enta tio n. Fed. Land Bank As s’n v . Slo ane , 825 S. W.2 d 439, 442 ( Tex. 1991)

. 5 Case: 11-20261 Document: 00511970656 Page: 5 Date Filed: 08/27/2012No. 11-20261

Century entered into both agreements, and therefore, Panteleeff’s a l l eged misrepresentations and omissions could not have induced New Century to enter into either agreement. Olympic simply transferred the ac c o u nt that New Century was taking over after New Century reached its deal wit h E d u c ation Advance. See Eagle Properties , 912 S.W.2d at 827 (recognizing t h a t “[a] representation made after a transaction is complete, no matter how false, cannot give rise to an action for fraud”). As for New Century’s negligent mi s r e p r e sentation claim, we agree with the district court’s conclusion that New Century has not shown that it suffered

a pecuniary loss b y j u s tifiably relying on Olympic’s representations. The economic-loss rule bars tort actions based solely on reco v e r y o f the loss or damage to the subject of a contract. See, e.g. , D.S.A. Inc. v. Hillsboro Indep. Sch. Dist. , 973 S.W.2d 662, 6 6 4 (T ex. 1998). New Century did not allege an injury distinct from the injury that it suffered under the Payoff Agreement. Moreover, New Century sought the exact measure of damages that it paid Olympic to

assume the Education Advance account und e r th e P ayoff Agreement. Therefore, the economic-loss rule bars New Century’s negligent misrepresentation claim. We conclude that the district cou r t d i d not err by granting summary judgment in favor of Olympic. AFFIRMED.

6 Case: 11-20261 Document: 00511970656 Page: 6 Date Filed: 08/27/2012